Insights 
VT 
Tesla shares have risen by 5.5%, helping Elon Musk regain his status as the world’s richest man after briefly losing it. The stock price has surpassed the high of $367 recorded on 28 May, driven by market optimism about potential interest rate cuts.
Concerns linger over Musk’s future earnings due to the potential end of tax credits and reputational challenges. Despite these challenges, Musk’s persuasive salesmanship is advancing the company towards robotics ventures.
Focus On Market Trends
The focus is currently less on earnings, as the upward trend suggests a possible return to the 2024 highs. With recent gains in Oracle shares, there is caution against taking short positions.
With Tesla breaking its summer high of $367, we see short-term implied volatility in the options market has jumped over 15% this week to nearly 58%. This makes buying weekly calls expensive, but it reflects the strong bullish momentum tied to broader market hopes for interest rate cuts. Traders are clearly paying a premium to bet on a continued push towards the highs we saw back in 2024.
For those who believe this trend has legs, the technical pattern of higher lows is encouraging and reminiscent of the powerful rally in the second quarter of 2023. Given the elevated option prices, we feel a risk-defined strategy like a call debit spread is more prudent than buying calls outright. For example, purchasing the October $380/$400 call spread could capture further upside while limiting the initial cost.
Considerations And Skepticism
However, we must also weigh the skepticism around fundamentals, as the complete phase-out of federal tax credits is expected to create a 5% headwind on gross margins in the next quarter. With the stock’s history of sharp reversals, buying long-dated puts for early 2026 could be a way to position for downside without getting caught in a short-term squeeze. This strategy allows time for the fundamental picture to potentially outweigh the current market sentiment.
The elevated volatility itself presents an opportunity for traders who expect the stock to eventually calm down. As we saw with Oracle’s unexpected surge last week, big tech names can make extreme moves, which is why option premiums are so high. We believe selling an iron condor with strikes safely outside the recent trading range could be a sound strategy to profit from time decay and a potential drop in volatility.
